Introduction

As part of various changes to the exclusion process for List 3, the Office of the US Trade Representative's (USTR's) recent proposal does not appear to include a mechanism for applicants to designate specific information requested (eg, company gross revenue and recent purchasing values and volumes) as being business confidential on the current form. It is unclear whether omitting information that is requested but not required would allow the USTR to dismiss the request since estimates are allowable for certain fields, although these appear to be limited to when actual information is unknown. Unlike the exclusion process for Lists 1 and 2, the new process for List 3 exclusions does not permit parties to submit written arguments in an attachment to the USTR's standard form, but rather all arguments must be submitted on the form itself.

Section 301 List 3

Section 301 List 3 covers $200 billion worth of Chinese goods and 5,745 product lines defined at eight-digit level of the Harmonised Tariff Schedule of the United States (HTSUS). Pursuant to a 9 May 2019 notice published by the USTR, the tariff rate applicable to List 3 goods was increased from 10% to 25% on 10 May 2019. The notice clarified that List 3 goods already in transit from China before 10 May and those that entered the United States before 1 June would be subject to the 10% duty rate rather than the higher 25% rate. However, goods exported on or after 10 May would be assessed at the 25% rate, as would all goods entering the United States after 1 June, regardless of the export date.

Proposed exclusion process

The proposed exclusion process for List 3 requires the submission of a standard exclusion request form, which is similar to the one used in the exclusion process for Lists 1 and 2, but with additional questions and new constraints. As with the prior Section 301 exclusion processes, the proposed List 3 exclusion process will include a 14-day comment period after an exclusion request is posted, followed by a seven-day rebuttal period. Similarly, the proposed exclusion process will still require the provision of:

  • a 10-digit HTSUS subheading;
  • a detailed product description (eg, dimensions, material composition, weight and function);
  • the annual quantity and value of the Chinese-origin product that the requester purchased in each of the past three years;
  • the percentage of gross sale or total cost that the subject import accounts for; and
  • information relating to the product's:
    • availability;
    • economic impact; and
    • relation to the Made in China 2025 plan or other Chinese industrial programmes.

New aspects of the proposed exclusion process include the following:

  • There is no reference to a mechanism for designating responses to questions within the form as business confidential information.
  • All arguments must be included in the form and separate written arguments are not allowed.
  • Questions relating to Lists 1 and 2 exclusion request submissions will be included, including whether the applicant has submitted past requests.
  • During the process, the following information will be requested:
    • the annual quantity and value of the product that the requester purchased from third-party sources in each of the past three years;
    • the annual quantity and value of the product that the requester purchased from domestic sources in each of the past three years;
    • the applicant's gross revenue information for 2018 and 2019; and
    • additional contact information, including the importer of record.

Commenting on exclusion process

Comments on the proposed exclusion process for List 3 must have been submitted to the Office of Information and Regulatory Affairs at the Office of Management and Budget by 7 June 2019 via:

  • e-mail to [email protected]; or
  • mail to 725 Seventeenth Street NW, Washington, DC 20503, for the attention of the USTR desk officer.

Preparing for implementation

As per the 21 May 2019 notice, the USTR plans to implement an exclusion process for List 3 on or around 30 June 2019. Companies are urged to be strategic when considering requesting an exclusion as there are several factors that are considered aside from the data required.

Status of Lists 1 and 2 exclusion requests

The previous exclusion processes included 10,834 exclusion request submissions for List 1 and 2,920 exclusion request submissions for List 2.

Status of Lists 1 and 2 exclusion requests as of 17 May 2019

  Stage 1 Stage 2 Stage 3 Granted Denied
List 1 0% 3% 23% 18% 55%
List 2 <1% 13% 54% 0% 33%

 

David Llorente, director of regulatory audit, also assisted in the preparation of this article.

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